Market momentum remained slow on Tuesday after a volatile day, especially for metal traders. Traders reassessed geopolitical news from Monday, which first pushed precious metals up before causing a sharp drop. Gold saw its biggest drop since late October, and Silver reached a record high before posting its largest slump since August 2020.
U.S. data was mixed: Pending Home Sales for November improved, but the Dallas Federal Reserve Manufacturing Business Index for December hit a six-month low. Financial markets across the region were quiet, with many professionals still on holiday.
Geopolitics dominated market direction, though the overall reaction was muted. In Asia, China held live-fire drills around Taiwan, marking its largest-ever military exercises near the island. These drills followed a U.S. arms package announcement for Taiwan. Despite the scale of the exercises, the market’s reaction remained limited.
Meanwhile, Middle East risks continued to affect energy markets. U.S. President Donald Trump warned that Washington might support new strikes if Iran were found rebuilding weapons programs, while urging Hamas to disarm. This revived regional tensions and kept a geopolitical premium on oil prices, despite no immediate supply disruptions.
Oil prices were also supported by headlines from Ukraine and Yemen. Saudi Arabia conducted airstrikes in southern Yemen and accused the UAE of supplying weapons to the targeted positions. This highlighted a growing divide between Riyadh and Abu Dhabi, adding more uncertainty to the Middle East. Additionally, U.S. inventory data showed a rise in crude and gasoline stocks, which would usually be bearish, but geopolitical concerns kept prices supported.
On the positive side, U.S. President Donald Trump and Ursula von der Leyen, President of the European Commission, expressed optimism about the Ukraine-Russia peace deal, though final details are still unconfirmed.
The U.S. equity market mood was cautious, reflected in mixed performances across sectors. Technology stocks in the semiconductor sector fell, signaling broader concerns. However, positive movement in financials and consumer staples like Apple (AAPL) and Procter & Gamble (PG) showed a shift toward safer investments.
Nvidia completed a $5 billion investment in Intel, strengthening Intel’s balance sheet and highlighting Nvidia’s strategic role in AI and computing.
Stronger demand for iPhones in China helped boost Apple’s outlook, with analysts setting a price target of $300–$315. Apple’s market share in China has recovered, which supports a positive view despite rising regulatory pressure. Wells Fargo kept its Overweight rating on Apple and its $300 target price.
Meanwhile, the U.S. Dollar Index (DXY) remained subdued, and Wall Street opened with modest losses and ended with a nearly 0.50% intraday drop. EURUSD rebounded from a week’s low, GBPUSD broke its two-day losing streak, and USDJPY fell as markets sought safer assets. AUDUSD and NZDUSD ended the day lower, while USDCAD broke a four-day losing streak. Gold and silver saw strong movements, as mentioned earlier, while Bitcoin (BTC) and Ethereum (ETH) hit weekly highs but ended the day with small losses.
EURUSD gained from a weaker USD and optimism around the Ukraine-Russia peace deal, rebounding from a week’s low on a quiet trading day. Similarly, GBPUSD posted its first daily gain in three days, despite a lack of major news from the UK. Meanwhile, JPY benefited from its safe-haven status and the softer USD, attracting sellers, especially with the Bank of Japan's hawkish stance. However, year-end consolidation kept USDJPY within a four-day trading range early Tuesday.
AUDUSD and NZDUSD remained under pressure, while USDCAD rebounded as traders sought more clues to justify risk aversion, despite a softer USD. The lack of major data or events in Australia, New Zealand, and Canada also kept Antipodean traders cautious. Despite a recovery in crude oil, which typically supports USDCAD sellers, mixed markets and year-end consolidation prevented any significant movement.
After a sharp decline, Gold and Silver posted mild gains, while Crude Oil held onto the previous day's recovery amid mixed market sentiment and a sluggish U.S. Dollar. The cautious mood ahead of today’s Federal Open Market Committee (FOMC) Minutes may have also influenced commodity prices. Despite a rise in U.S. crude inventories, oil prices ignored the data, supported by ongoing geopolitical concerns in the Middle East and Russia.
Bitcoin (BTC) and Ethereum (ETH) both reached weekly highs amid early Monday optimism surrounding the Ukraine-Russia deal, before ending the day lower. However, the momentum faded early Tuesday as traders looked for major clues and adopted a cautious mood ahead of today’s FOMC Minutes.
Although Tuesday morning is quiet, the U.S. open and upcoming data might lead to a busier trading session before the Federal Open Market Committee (FOMC) Minutes. Mid-tier U.S. data will be released before the FOMC Minutes and could influence intraday moves for the U.S. Dollar (USD). Major focus will remain on risk-related news. Despite market fears, the Greenback’s initial weakness could mean that today’s events may impact Cryptocurrencies and equities, while the USD could rebound if Federal Reserve officials sound hawkish and if the incoming activity and housing sentiment data are positive.
May the trading luck be with you!
